ICBA opposes expanding the requirement of financial institutions to collect information on natural person owners of legal entity accounts (beneficial ownership information) and believes such a requirement is misguided and ineffective.

Nonbank institutions that perform “bank-like” functions and offer comparable financial services should be subject to the same anti-money laundering and BSA laws and regulations as banks.

The federal government should develop a single comprehensive watch-list for terrorists.

Background

Community bankers are committed to supporting balanced, effective measures that will prevent terrorists from using the financial system to fund their operations and prevent money launderers from hiding the proceeds of criminal activities. As the Financial Crimes Enforcement Network (FinCEN) identifies additional high risk transactions and accounts, it increases banks’ requirements in these new areas. ICBA strongly urges the federal government to recognize the costs and burdens these requirements impose on financial institutions, especially community banks, and to find ways to streamline requirements by identifying low-risk transactions and accounts and reducing the requirements for them. It is important that Congress, regulators and law enforcement recognize the extensive efforts made by community banks to prevent money laundering and terrorist financing and compensate them, either financially or through reduced regulatory burden in other areas. ICBA applauds initiatives by Treasury to develop new programs and supports FinCEN’s fresh look at all BSA compliance requirements.

Bank Secrecy Act (BSA) Requirements Should Be Flexible and Easily Applied. ICBA encourages the federal government to continue working with the banking industry to provide additional guidance—such as best practices, questions and answers, or commentary—that is understandable, workable and easily applied by community banks. ICBA encourages FinCEN to continue its investigation and adaptation of technology to assist banks with their BSA compliance requirements. ICBA also encourages the Office of Foreign Asset Control to streamline and simplify its lists for ease of reference and application by bankers. Communication Among Industry, Law Enforcement and the Federal Government is Critical. Since communication and cooperation are critical to an effective working partnership among the government, law enforcement, and financial institutions, ICBA urges the federal government to better inform bankers of what specific methods of terrorist financing and money laundering they are trying to prevent. With this understanding, bankers can supply information more efficiently and obtain better results for law enforcement.

Beneficial Ownership. Expanding the regulatory requirement to collect beneficial ownership information on legal entity customers would be burdensome and difficult for community banks to implement. Beneficial ownership information should be collected and verified at the time a legal entity is formed. Collecting and verifying the identity of all natural person owners of each entity by either the Internal Revenue Service or other appropriate federal agency and/or state in which the entity is formed would provide uniformity and consistency across the United States. By making the formation of an entity contingent on receiving beneficial owner information, strong incentives would be created for equity owners and investors to provide such information. Additionally, periodic renewal of an entity’s state registration would provide an efficient and effective vehicle for updating beneficial ownership information.

BSA Reporting Should Be Simplified. ICBA appreciates and supports FinCEN’s efforts to simplify certain BSA forms and encourages the government to continue streamlining other reporting requirements.

As the government continues to combat money laundering and terrorist financing, it is important to focus on quality over quantity for all BSA reporting. To ensure a consistent and balanced effort to combat money laundering and terrorist financing, the federal government should have consistent regulations across all financial services providers including nonbank entities. Additionally, the government should require reporting of only truly suspect transactions—and strive to balance those requirements against the need to respect customer privacy.